With the implementation of the Affordable Care Act, changes to the healthcare marketplace are starting to become evident. / Getty Images / Creatas RF

Written by

Richard Cowart

For The Tennessean

Recently, I spoke to a national conference of surgeons and gave them a look at some of the key early indicators from the rollout of the Affordable Care Act. The new insurance products took effect Jan. 1, and a few trends are already emerging.

Regarding enrollment, as of Feb. 1, 3.3 million Americans had enrolled in ACA health plans. This does not include state Medicaid/CHIP enrollees (an additional 3.2 million). There were actually 64 million visits to www.healthcare.gov with 6.5 million completing the formal application process.

Of the applicants, 1.9 million enrolled through the federal-facilitated marketplace, and 1.4 million through various state-based marketplaces. A complete report is available online.

Two key indicators are worth noting. First, 81 percent of the enrollees chose either a Silver Plan or a Bronze Plan, an indication that price really matters. In fact, price may be the key factor. Secondly, 82 percent of the enrollees purchased products with financial assistance, which means the government was paying a significant portion of the premium.

Price matters, but price is defined as what the enrollee pays, not what the premium actually is! If the new consumer is the individual purchaser, and the new competition is price, how does that affect the health care ecosystem?

People shop on the Internet and make online purchasing decisions every day. Individuals’ purchase of health insurance might be seen as similar to individuals’ purchase of automobile insurance. Consider two price competitors: GEICO and Allstate. GEICO began with its advertising of cheaper, comparative pricing and now the GEICO tagline is “15 minutes will save you 15 percent or more.”

The competitive response from Allstate was to purchase Esurance, an Internet-based automobile insurance product, and to add the tagline “With Esurance, 7˝ minutes could save you on car insurance. Welcome to the modern world.” Not only is price the competitive factor, reducing price is the imperative for market share.

I polled the surgeons attending the conference on a few key questions. The results were interesting.

I asked how many had used the Internet to purchase their airline tickets to the conference. More than 80 percent responded that they had. I then asked if price was a major factor. Again, more than 80 percent said yes.

Next, I asked how many had checked the name and safety record of the pilot. No hands went up. Finally, I asked how many surgeons knew the hospital price for the most common procedure they perform on patients. Less than 10 percent knew the answer.

What does this suggest for health care? Price competition among insurance companies is not uncommon, although perhaps now it’s more transparent. Among hospitals, the renegotiation of managed-care contracts is a form of price competition, but one largely opaque to the general public. Among physicians, prices are largely imposed by Medicare and private insurers, except for a few retail procedures, such as laser eye surgery.

Regarding episode of care pricing (the combination of physician, hospital, lab and other procedures), the marketplace is largely developmental. In summary, if the individual is the consumer, the marketplace is the Internet, and the competitive differentiation is price, health care has a lot to learn.

As we begin the implementation of the ACA, we are entering a zone of the unknown. Stay tuned as we continue to analyze the market events and reactions.

Richard Cowart is chairman of the health law and public policy departments at Baker Donelson law firm. Reach him at dcowart@bakerdonelson.com.